The Real Issue: Election to decide which party sets B.C.’s economic course for decades

Scott Simpson, Vancouver Sun04.26.2013

This election is more than just a decision about which political party is best-equipped to run the province for the next four years. The next government will be setting a course for B.C.’s economic development for at least 20 years.
A large number of complex, expensive, long-term agenda-setting decisions await the next government, and will resonate in people’s lives and their wallets.
/ PNG

Usually, the issues don’t loom as large as such hyperbole from campaigners would suggest. But at other times, such as B.C.’s May 14 provincial election, they do.

This election is more than just a decision about which political party is best-equipped to run the province for the next four years. The next government will be setting a course for B.C.’s economic development for at least 20 years.

A large number of complex, expensive, long-term agenda-setting decisions await the next government, and will resonate in people’s lives and their wallets.

BC Hydro, the province’s largest Crown corporation, needs a decision on whether to proceed with the proposed $7.9-billion Site C power project on the Peace River.

The government and Hydro must decide how to reconcile customers’ ability to pay against a debt ($18 billion by 2015) that is growing while Hydro renews its aging “heritage” network of dams, power stations and transmission wires for the first time in a generation.

In the Lower Mainland, regional transit authority TransLink is warning that without a multibillion-dollar infusion of government funding it will be forced to choose between two equally worthy rapid transit projects — light rail to shape growth in booming Surrey and SkyTrain along Vancouver’s over-capacity Broadway corridor to the University of B.C. If there’s only one winner, the loser likely won’t see any traffic relief until 2029.

That’s just the start.

National Energy Board reviews for the Northern Gateway and Kinder Morgan oil pipelines will likely wrap up after the next government takes office, and decisions will be required on whether to support them and the billions of dollars in additional revenue they would generate for the Canadian economy.

At least two world-class copper mines could open up in northwest B.C. — and at least a dozen are far enough into development that they may all qualify for mining permits by 2017 if they were to be judged to satisfy environmental requirements.

There is urgency around B.C.’s skilled labour shortage, around a film and television industry that insists it won’t thrive without big subsidies, and especially around measures to aid the long-term recovery of a forest industry that has lost 40 per cent of its Interior wood supply to the pine beetle.

The reversion to provincial sales tax (PST) means the province’s industries and businesses are returned to a complex tax regime that makes B.C. a less attractive place to invest. Reforms may be imperative.

A decision is needed on whether to continue the carbon tax, and whether to increase it if it remains. If the tax goes up, the government must decide whether to make a commensurate cut to personal and corporate income taxes — as the Campbell government did when the tax was introduced in 2008 — or to channel the extra money into general revenue or perhaps debt reduction.

Taxpayer-supported debt is projected to grow from $38 billion in the 2012-13 fiscal year to $46 billion in three years — and consume a growing portion of the province’s gross domestic product in the process.

On top of all this, a decision is required on the extent to which the province will support the emergence in Kitimat and Prince Rupert of a world-class liquefied natural gas (LNG) export industry.

B.C. could gain significant royalty revenue from gas exports, but LNG processors need more energy than BC Hydro is in a position to supply in the near term. If B.C. wants LNG processors to rush into the Asian market, it will have to allow them to power up using natural gas rather than greener electricity such as hydro. However, that would cause a spike in B.C.’s industrial greenhouse gas emissions equivalent to 130 per cent of annual GHG emissions from all 68 of B.C.’s major industrial emitters, according to data from Environment Canada and the Pembina Institute.

It’s not immediately clear how B.C. can reconcile its CO2 reduction goals with its need to use natural gas to drive economic growth and generate revenue.

“Provincewide, we’ve got to get some alignment between our energy extraction vision and our environmental vision,” said Nancy Olewiler, the director of Simon Fraser University’s school of public policy.

“Good luck to the next government. It’s a big agenda, but I also think it’s a tremendous opportunity to engage British Columbians in what they want to see their environment and economy be, and get some thoughtful and long-serving policy directions.”

Olewiler believes it would be prudent for the next government to take “a more comprehensive … look at how we use our natural resources instead of trying to get the darn stuff out of the ground as fast as we can (and) incur all of these trade-offs in terms of environment.”

That includes deliberating on a wide range of options that might encourage economic growth, she added.

That could include building new gas-fired generation stations in the northeast, home of the province’s gas exploration industry, and exporting electricity to the U.S. rather than piping raw gas across the province and selling it offshore, she said.

Considering the carbon tax as a possible mechanism for funding other government priorities is another option.

Beyond the energy sector, Olewiler said the province should also look at tax “barriers” that penalize small companies as they grow into larger ones — such as an effective tripling of the provincial tax rate when they advance from the small business to the corporate tax rate.

Greg D’Avignon, president and CEO of the Business Council of B.C., sees a “myriad of public policy issues facing the government, some of which really beg for a vision of the province for the next 20 years that will shape that opportunity and shape the province economically.”

He cites “generational change” as one of the challenges. Demographers predict B.C.’s workforce – people 16 to 64 – will peak in 2015 at 70 per cent of the population and then decline to 55 per cent of the population by 2036 as the baby boomers retire.

“If we don’t get it right, we are going to have some significant problems around education training, government revenues, and also we will have lost opportunity,” D’Avignon said.

A shift in economic power from Western nations to Asia continues, and lingering uncertainty in the global economy means that “the province has limited resources to be able to do some of the traditional things, whether they are NDP or Liberal, that they would do heading into an election, let alone coming out of it.”

B.C. has advantages that favour its economy, including world-class post-secondary education and mining expertise, a strong record for research and development, and a trade economy that is equally diversified into Asia and the United States.

Where we lag behind is competing for outside investment “given the complexity of doing business in British Columbia” such as the province’s tax and regulatory regimes.

“I think we need to start asking the question of British Columbians, ‘How do we do things’ as opposed to ‘Why should we do them?’ ” D’Avignon said.

“One of the keys that the government needs to focus on is starting to change the culture and debate in British Columbia on how we inform ourselves and how we make decisions. We need to do a better job of understanding the common fact base in B.C. because we tend to have rhetorical debates that never really get to an informed decision point.”

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The Real Issue: Election to decide which party sets B.C.’s economic course for decades

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